Stocks and real estate investments are significant types of investments and they are 2 of the hottest investment items nowadays. When it comes to the question of which is the better investment of the two, you’ll get varying answers. This is because it is a subjective topic and the choice really comes down to the investor’s personality, preferences, and style. We’ll discuss the key features of each of these two types of investment and their pros and cons to help you decide which investment is the right fit for you.
Stocks or Real Estate – Which is the Best Fit for You?
This is the question that is more fitting when it comes to choosing from stocks and real estate investments. When pitting stocks vs real estate investments against each other, the best judge will always have to be the investors themselves. Both investments are actually good, but the decision of the investors can boil down to personal preference, tolerance to risk, investment objectives and the current value of the investments.
Real estate investment has historically been one of the earliest investment types in our society. Land, and consequently the structures built on it, have become precious commodities as years pass by. This contributes to the appreciation of an increase in the value of land over time. Aside from appreciating value, here are some of the basic advantages of investing in real estate:
- Most lower and middle-class investors prefer real estate investment. The family has played a key role in this trend of investment preference due to the value that most parents place on the importance of owning a home. Thus, when it comes to investments, most people from the lower and middle-class brackets are open to buying land than other investments.
- Real estate is tangible. Most people feel secure when they see and feel what they’re investing in. There is a sense of psychological weight or importance of tangibility for some people, which makes real estate appealing.
- Real estate investment is a great inflation hedge. It can protect you against a loss in purchasing power of the dollar.
While real estate seems like a good investment option, you have to be prepared to do more hands-on work to manage your investment. You’d have to do regular checks and inspections of your property and oversee the dealings and operations concerning your property. You also need to be prepared to shoulder some of the costs of maintaining your property if it is unoccupied. You’ll have to pay taxes, utilities, insurance and more. Nevertheless, these factors can be taken care of with due planning and preparation.
The good thing about stock investment is that you receive ownership in a company. You can see yourself grow and prosper along with a company’s growth. It’s like joining a business partnership but minus the hassle of formulating business plans, keeping inventories and overseeing the finances of the business. Discussed below are other key advantages of stock investment.
- Stock investment is known for its resilience. Despite all of the stock market crashes, buying stocks, reinvesting the dividends, and maintaining the investment for a considerable period of can still create significant wealth.
- Diversification is a key feature of stock investment. You can choose from three main options in investing in stock equities: individual stocks, mutual funds, and index funds. You can even invest as little as $100 per month with some mutual funds.
- You can collect income from your investments. This is especially true if you invest in dividend-paying stocks. There is still some income to collect even during times when the economy is in a slump.
While stock investment is an attractive type of investment, there is a possibility that you will lose money, especially if you don’t know what you’re doing or if you make beginning investor mistakes. Investing in stocks requires patience and a cool temperament as the stock market can be volatile. There may be gains and losses over the years, but the direction of the investment always goes up in the long run.
Both stock and real estate investments are good ways of growing your money. Deciding on the better investment from the two can take time, and would depend on the person investing. Thus, choose the one that can work best with your preference and lifestyle. After all, these investments aren’t short term endeavors. They should be maintained for a long time and that’s when you’ll see the fruition of the investments you make.